Topic: Abandoned Baby
Type: Dual
Trend
direction: Reversal
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| Abandoned Baby Candlestick on Ford Motor Company Stock chart |
🙋♂️Hi friends,
we see that the Forex market, which is open 24/5 around the 🌏world, is gaining
more and more popularity. In addition to the foreign exchange market, “technical
analysis” is becoming indispensable, especially in today's world of
cryptocurrencies, indices, commodities and stocks. The Alphabet of technical
analysis is, of course,🎌Japanese Candlesticks. Candlesticks tell us the story
behind price movements. Accordingly, reading the candlestick chart correctly
allows us to make profitable trades and succeed in the market. In today's
article, we will talk about one of the various candlestick patterns, the 🎈“Abandoned
Baby Candlestick” pattern.
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| Abandoned Baby Candlesticks |
❓ Why is
it called that?
This
formation, consisting of three candles, is 🗣called the “Abandoned Baby
Candlestick Formation” because it appears to be abandoned by the first and
third candlesticks, and due to the Doji that occurs in the second candlestick.
The second candlestick is separated from the first and third candlesticks
through a gap. See example picture
There are two types of Abandoned Baby Candlesticks:
- Abandoned Baby Candlestick Bearish 🐻
- Abandoned Baby Candlestick Bullish 🐮
1️⃣Abandoned
Baby Candlestick Bearish:
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| Abandoned Baby bearish |
❓ How does it occur?
This
pattern occurs when there is a gap between the candlestick preceding a
Doji-like candle. The preceding candlestick represents a small-bodied, long
green (or white) candle, indicating an uptrend in the market. Next, the Doji
appears with a gap from the highest price of the following candlestick. This
situation indicates indecision between buyers and sellers during a certain
period. The market's opening price being different from the closing price
creates these gaps. The next candlestick is a long red (or black) candle with
small shadows. This condition signifies that bears (sellers) are gaining 💪strength.
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| Bearish Abandoned Baby in Apple Inc. stock |
❓ How do
we trade?
When a “Bearish
Abandoned Baby Candlestick” appears, it is considered a signal for a top
reversal or at least a short-term reversal in a rising price. The confirmation
level of this Candlestick pattern is set at the last closing price, thus
confirming the pattern. If prices break this level to the downside, it is a
positive trading signal.
2️⃣Abandoned Baby Candlestick Bullish:
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| Abandoned Baby bullish |
❓ How does
this pattern appear?
The First
Candlestick is seen as a long red (or black) candlestick during a downtrend,
indicating that the market is under the control of bears (sellers). The Second
Candlestick is a small-bodied candlestick with a long shadow, or a Doji,
positioned just below or beside the first candle. There is a gap between them.
This candle suggests that the market is becoming uncertain, and the strength of
the downtrend is weakening. The Third Candlestick forms a long green (or white)
candlestick above the second candle. This green candle indicates that the
bearish strength has been broken, signaling the beginning of an uptrend with
the 💪strengthening of bulls (buyers).
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| Bullish Abandoned Baby in Amazon.com, Inc. stock |
❓ Which
steps should we follow to trade?
When the “Bullish
Abandoned Baby Candlestick” appears on the charts during a downtrend, it is
known as a reversal signal, indicating a possible turnaround or at least a
short-term reversal. With the expectation that the price will continue to rise,
if the price moves upward, breaking above the high of the third candle, it is
commonly considered a buying opportunity. As a standard practice, a Stop Loss
order is placed below the lower shadow of the bullish abandoned baby candle
(doji) to limit probable losses. For those who wish to take less risk, a
stop-loss order can be placed just below the low of the third candle in the
pattern.
While
forming the “Abandoned Baby Candlestick”, there are no distinct rules for
setting profit targets, but generally, a 🌐 Fibonacci retracement level is often
used as a profit target. This applies to both Bear and Bull markets.